Wide Angle

Bloomberg : Despite the protests in the Rif region Morocco's bonds remain attractive

Investors are neglecting the current situation in the northern region of Morocco as protests continue to add pressure on the country’s bond market. In an article published by Bloomberg, the latter gave a detailed explanation about the consequences that could occur due to the anti-government manifestations that broke off 6 months ago in the Kingdom. 


Estimated read time: 2'

According to an article published on the 12th of June by Bloomberg, a privately held financial software, data, and media company headquartered in Midtown Manhattan, New York City, «investors are ignoring the protests» taking place in Morocco. The American media platform suggests that Morocco’s credit default swaps, as opposed to expectations should «be trading at least 50 percent higher». 

As a matter of fact, Bloomberg is indicating that Morocco's economy, despite the events taking place in the Rif region, manages to be one of the strongest in the North African region. With a BBB- sovereign risk rating the Kingdom is considered to be an investment grade economy which justifies its attractiveness for investors.

«Yields on securities issued by the region’s lone investment-grade nation have dropped even as thousands took to the streets in an escalation of discontent simmering since October over unemployment and corruption», the same source indicates explaining that Morocco can bring high returns while remaining a fairly low risk bet. 

«Political and social support for King Mohammed VI remains high»

However, Bloomberg believes that the situation is quite abnormal as protests burst in Al Hoceima region and predicts it should normally have affected the cost of risk. Hakki Vural, a money manager at Union Investment Privatfonds GmbH who owns Moroccan bonds told the same source that he is «paying attention to the recent anti-government protests», adding that tension will be contained as the «political and social support for King Mohammed VI remains high». 

In fact, Bloomberg's model shows that Morocco’s economy is getting globally better indicating that the country’s GDP «growth [will] accelerate to 4.2 percent this year, after a drought that curbed agricultural exports to Europe limited the expansion to 1.5 percent in 2016. Morocco’s current-account deficit has eased to 1.1 percent from more than 9 percent in 2012».  These positive signs are also met favorably by investors as the media points out, which buoys the Moroccan government Eurobonds, lower the yields and further attracts other financiers. 

Philippe Dauba-Pantannacce, a London-based senior economist and geopolitical strategist at Standard Chartered Bank, explained that «contrary to many of its peers, there is a carefully calibrated space for dissent in Morocco», he stated that «investors tend to have a certain confidence in the Moroccan leadership’s ability to steer the country and strike a balance between stability and space for dissent».

In other words, despite the events taking place in Morocco politically-speaking, the country remains an attractive destination for investors and bond buyers who are in the hunt for bigger returns on their investments. 

Be the first one to comment on our articles...